Question

Identify the accounting concept which is being violated in following

situations:

i) Employees of Z Ltd. went on strike and accountant of Z Ltd. recorded

this loss.

ii) Mr. Pankaj a sole proprietor recorded expenses of his family trip to

Shimla, paid out of his personal bank account, as expense of business.

iii) Ms. Archana a owner of a boutique recorded advance received

against sale of goods of Rs. 40,000 on 1st Dec. 2019 for goods to be

delivered on 1st May 2020. Accountant of the boutique recorded it as

sales for the year ended 31st March 2020.​

Answer 1

Answer:

Ans (i)  money measurement principle

Ans (ii) historical cost concept

Ans (iii) accural principle , revenue recognition principle.

Explanation:

(i)  according to the money measurement principle , only cash related transactions are to be recorded in the books of  accounting .

(ii)  Historical cost concept states that only business related transactions are to be recorded in the books accounting.

(iii)  expense is recorded when the services are given and not when actual transaction takes place . Also , the whole accounting period is been divided into a period of 12 months .